We recently compiled a list of the 9 Best Gun Stocks to Buy Now. In this article, we are going to take a look at where Sturm, Ruger & Company, Inc. (NYSE:RGR) stands against the other gun stocks.
Gun Culture in the United States
Civilians can own guns in over 175 countries of the world, albeit with laws and regulations restricting certain firearms. Ten of these countries had enshrined the right to own and bear arms in their constitution at some point in their history. Four still do – the United States, Mexico, Haiti, and Guatemala.
The most notable of these four is the United States. The country has the highest gun ownership in the world, with an estimated 393 million firearms owned by civilians, which translates to 120.5 guns per 100 people in the country, as we mentioned in the article 25 Countries with Highest Gun Ownership in 2024. The number of firearms in the United States outnumbers the country’s overall population. Moreover, despite Americans representing only 5% of the world’s population, the country is home to 40% of the world’s civilian-owned firearms.
The nation has a deep connection to guns, dating back to its earliest days. While there is mixed opinion over the right to own a gun and the laws that regulate its use in modern times, most gun owners consider the weapon an integral part of their freedom. The demand for weapons continues to remain on the higher side, which has given rise to a thriving firearms industry that employs thousands of Americans and generates billions of dollars in tax revenue for the government every year.
Gun and Ammunition Industry
America’s gun market is a significant contributor to the country’s economy. In 2023, the sector was responsible for over $90 billion of all economic output in the United States, according to The Firearm Trade Industry Association. This figure was 12% higher compared to 2022 when the economic activity from guns was valued at $80.7 billion. The industry in recent years has witnessed extraordinary growth, as more Americans choose to exercise their right to own guns, with 4.3 million citizens becoming new gun owners last year alone.
The report further mentioned that the market has created hundreds of thousands of jobs in the United States, directly in the guns and ammunition industry and indirectly in the ancillary and supplier industries. As of last year, 384,437 jobs in the country were tied to the sector, earning nearly $26 billion in combined wages. As a result, companies in the industry and their employees pay over $10 billion in taxes each year to federal and state governments.
Gun sales are soaring in 2024 as well. According to the FBI, an estimated 5.5 million new guns were bought during the first four months of the year. California, Florida, and Texas contributed 22% of all guns purchased during this period. SafeHome.org, a security and safety website, believes the upcoming 2024 presidential election in the US is a factor driving up gun sales in the country with varying opinions on strict gun laws among candidates running for the White House.
Gun stocks surged in July this year after the assassination attempt on presidential candidate, Donald Trump, which increased expectations of his victory. Trump has vowed to protect gun rights and oppose any firearm limits if he is elected this November. The assassination attempt was not the first instance of gun stocks spiking after a security crisis, mass shooting, or civil unrest. The demand for guns and ammunition has seen an uptick every time there has been a law and order incident or a fear that their availability will be limited through strict gun laws.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to identify gun and ammunition manufacturing companies. From that list, we picked 9 gun companies with the highest number of hedge funds having stakes in them. The best gun stocks to buy now are ranked in ascending order of hedge fund holders in each company. In the case where two or more stocks were tied on the number of hedge fund holders, we outranked one over the other on market capitalization.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A row of raw materials in pristine condition, waiting to be crafted into firearms.
Sturm, Ruger & Company, Inc. (NYSE:RGR)
Number of Hedge Fund Holders: 14
Sturm, Ruger & Company, Inc. (NYSE:RGR) is an American firearms company that has a diverse portfolio of products, mainly serving three product lines – pistols, rifles, and revolvers. It is among the largest firearm manufacturers in the United States. During the first half of FY24, the company had net sales worth $267.6 million with earnings per share of $0.47. These figures were down from the corresponding period in 2023, when the firearms manufacturer posted revenues of $292.3 million, with EPS of $1.72.
The downturn has been driven by several factors, including a drop in production, increased sales of products with lower gross margins, and unfavorable fixed costs due to a rise in inflation. This has led to a bearish sentiment around the stock among certain analysts and investors.
However, Sturm, Ruger & Company, Inc. (NYSE:RGR) is determined to turn things around and had an improved second quarter compared to the first. During Q2, production increased by 18%. The management believes the increase in output will help the company leverage its problem of fixed costs, and improve margins. The company laid off some of its workforce during the first quarter, which also helped limit some of its fixed costs during the second quarter.
Sturm, Ruger & Company, Inc. (NYSE:RGR) is also popular among investors due to its cash flow generation and short-term investments. The company had a current ratio of 4.8 to 1 at the end of the second quarter and had no debt. Stakeholder equity was measured at $322 million, which reflected a book value of $18.9, of which one-third comprised cash and short-term investments. According to Insider Monkey, 14 hedge funds had stakes in the company during Q2 2024. The stock has an average share target price of $51, representing a 23% upside from its current level.
Sturm, Ruger & Company, Inc. (NYSE:RGR)’s new products are also performing well, accounting for a major share of the company’s overall sales. 32% of all firearm sales of the company in 2024 were of new products launched in the last two years. Increased demand for new, as well as existing products, has also resulted in reduced inventory costs for the company.
Overall RGR ranks 7th among the best gun stocks to buy now. While we acknowledge the potential of RGR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RGR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.